The issuance of Accounting Standards Codification (ASC) 805 (formerly SFAS No. 141) and Accounting Standards Codification (ASC) 350 (formerly SFAS No. 142) has made it critical for buyers and sellers to consider how a transaction may impact financial reporting.
When contemplating an acquisition, an acquirer needs to make sure that goodwill from the acquisition is not going to be impaired in the future. Further, it is necessary to project as accurately as possible the future charges to expense related to amortization of intangible assets. Publicly traded firms are sensitive to reported earnings per share, which will be affected by intangible asset amortization. Companies often ask us to prepare a pre-acquisition valuation of intangible assets and goodwill to help them determine whether a proposed acquisition will be accretive.
Our professionals also prepare opinions with respect to solvency and fairness. Solvency opinions are generally prepared for lenders, boards of directors, buyers and sellers, and creditors. We provide solvency opinions for highly leveraged transactions, capital restructurings, and debt refinancings.
Fairness opinions are typically prepared for independent directors and fiduciaries, buyers and sellers, limited partners, institutional investors, and trustees. Transactions triggering fairness opinions are tender offers (LBO, MBO, and going private), large block stock purchases, mergers, divestitures, reorganizations, and hostile takeovers.